Share Exchange Agreement Between American Stem Cell Corporation And Lifeline Cell Technology, LLC

Exhibit 10.1

SHARE EXCHANGE AGREEMENT

This Share Exchange Agreement (the "Agreement") effective as of July 1, 2005, is by and between AMERICAN STEM CELL CORPORATION, a corporation organized under the laws of Nevada (" ASC "), having its principal offices at 157 Surfview Drive, Pacific Palisades, CA 90272, LIFELINE CELL TECHNOLOGY, LLC , (" Lifeline ") a limited liability company organized under the laws of the state of California and having its principal offices at 157 Surfview Drive, Pacific Palisades, CA 90272, and the members of Lifeline (the " Holders "). The list of Holders is attached hereto as Exhibit "A".


RECITALS:


A. The Holders own 100% of the membership interests in Lifeline.

B. ASC desires to acquire all of the Holders ' interests in Lifeline in exchange for shares of authorized, but unissued ASC Preferred shares as hereinafter provided.

C. It is the intention of the parties hereto that: (i) ASC shall acquire all of the Holders' interests in Lifeline in exchange solely for the number of shares of ASC's authorized but unissued shares of Series A Preferred Stock, $0.0001 par value (" ASC Preferred"), set forth below such that Lifeline will become a wholly-owned subsidiary of ASC (the "Exchange").

D. The board of directors of ASC deems it to be in the best interest of ASC to acquire all of the issued and outstanding membership interests in Lifeline.

E. The Holders deem it to be in their best interest to exchange all of the membership interests in Lifeline for shares of ASC Preferred, as hereinafter provided.


NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the parties hereto agree as follows:


SECTION 1. EXCHANGE OF SHARES


1.1 Exchange of Shares. ASC and the Holders hereby agree that Holders shall, on the Closing Date (as designated by the Board of Directors of ASC ), transfer, deliver and contribute shares representing all of their interests in Lifeline (the " Lifeline Units ") to ASC and ASC shall simultaneously deliver 18,000,000 shares of ASC Preferred to the Holders, free and clear of any mortgage, deed of trust, lien, security interest, pledge, lease, conditional sale contract, claim, charge, assessment, restriction, and other encumbrance of every kind (each, and "Encumbrance"), except as set forth on Schedule 1.1 ("Existing Encumbrances"). In addition to the ASC Preferred shares to be received by the Holders, Ken S. Swaisland and certain additional persons to be designated by him, each of whom is an accredited investor under U.S. securities laws (collectively, "Swaisland"), shall purchase for cash or other consideration up to an additional 50,000 shares of ASC Preferred at the price of $1.00 per share (the "Investment"). The rights and terms associated with the ASC Preferred are set forth in Exhibit "B," The Amended and Restated Certificate of Incorporation of American Stem Cell Corporation. The ASC Preferred shares shall be restricted against resale pursuant to the provisions of Federal and state securities laws.


1.2 Restricted Securities. The Preferred shares provided in the Exchange have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be resold unless the resale thereof is registered under the Securities Act or an exemption from such registration is available. Each certificate representing Preferred shares will have a legend thereon in substantially the following form:


The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). The shares have been acquired for investment and may not be sold or transferred in the absence of an effective Registration Statement for the resale of the shares under the Act unless in the opinion of counsel satisfactory to the Company, registration is not required under the Act.


1.3 Tax Consequences . It is intended that the Exchange made by the Holders pursuant to this Agreement and the Investment made by Swaisland under this Agreement shall qualify as an incorporation transaction under Section 351 of the Internal Revenue Code.


1.4 Schedules. The Schedules referred to herein shall be delivered to LifeLine, ASC and their respective counsel on or before the Closing date and shall be incorporated herein and become a part of this Agreement as of the Closing.


SECTION 2. REPRESENTATIONS AND WARRANTIES OF LIFELINE


Lifeline hereby represents and warrants as follows:


2.1 Organization and Good Standing. Lifeline is an entity, duly organized, validly existing and in good standing under the laws of the California. Lifeline has the power and authority to carry on its business as presently conducted, and is qualified to do business in all jurisdictions where the failure to be so qualified would have a material adverse effect on its business.


2.2 Authority. Lifeline has the power to operate as a limited liability company and to perform any corporate obligations hereunder. The execution and delivery of this Agreement by Lifeline and the Holders , and the consummation of the transaction contemplated hereby, do not violate any State, Governmental or corporate restrictions governing these transactions. The execution and performance of this Agreement, ultimately effecting a change in control of Lifeline , will not constitute a breach of any agreement, indenture, mortgage, license or other instrument or document to which Lifeline and/or its Holders are known by Lifeline to be a party and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to Lifeline , its Holders or their properties. The execution and performance of this Agreement will not violate or conflict with any provision of the laws of the State of California.


2.3 The Lifeline Shares . The Holders are the owners of record and beneficially of all of the issued and outstanding membership interests of Lifeline . Except as set forth on Schedule 2.3, each Holder represents and warrants that he owns such shares free and clear of all rights, claims, liens and encumbrances, and the shares have not been sold, pledged, assigned or otherwise transferred except pursuant to this Agreement.


2.4 Receipt of Corporate Information; Independent Investigation; Access . As requested, all documents, records and books pertaining to ASC and the Preferred shares have been delivered to Lifeline . All of Lifeline's questions and requests for information have been answered to Lifeline's satisfaction. Lifeline acknowledges that, in making the decision to recommend the exchange of all of the Holders' membership interests in Lifeline for ASC Preferred , it has relied upon independent investigations made by its agents or their representatives, if any, and they have been given access to and the opportunity to examine all material contracts and documents relating to this Agreement and an opportunity to ask questions of, and to receive information from, ASC or any person acting on its behalf concerning the terms and conditions of this Agreement.


2.5 Financial Statements: Books and Records. Lifeline will provide audited financial statements as of December 31, 2004, and unaudited quarterly statements as of the six months ended June 30, 2005 (the " Lifeline Financial Statements ") to ASC by July 31, 2005 or such earlier date as may be practicable. These Lifeline Financial Statements shall fairly represent the financial position of Lifeline at those dates and the results of their operations for the periods then ended. The Lifeline Financial Statements will be prepared in accordance with generally accepted accounting principles applied on a consistent basis with prior periods except as otherwise stated therein. The books of account and other financial records of Lifeline are complete and correct in all material respects and are maintained in accordance with good business and accounting practices.

2.6 No Material Adverse Changes.

Except as described on Schedule 2.6, since June 30, 2005, there has not been:

(i) any material adverse changes in the financial position or operations of Lifeline except changes arising in the ordinary course of business, which changes will in no event materially and adversely affect the financial position of Lifeline;

(ii) any damage, destruction or loss materially affecting the assets, prospective business, operations or condition (financial or otherwise) of Lifeline whether or not covered by insurance;

(iii) any declaration setting aside or payment of any dividend or distribution with respect to any redemption or repurchase of Lifeline Units , other than as agreed upon among the parties;

(iv) any sale of an asset (other than as described in (iii) above, or in the ordinary course of business) or any mortgage pledge by Lifeline of any properties or assets;

(v) adoption or modification of any pension, profit sharing, retirement, stock bonus, stock option or similar plan or arrangement.

(vi) except in the ordinary course of business, incurred or assumed any indebtedness or liability, whether or not currently due and payable;


(vii) any loan or advance made to any Lifeline Shareholder, officer, director, employee, consultant, agent or other representative or made any other loan or advance otherwise than in the ordinary course of business;

(viii) any material increase in the annual level of compensation of any executive employee of Lifeline ; or

(ix) any modification of any existing contract, agreement or transaction.


2.7 Compliance with Federal and State Securities Laws . Lifeline understands that the Preferred shares have not been registered under the Securities Act. Lifeline understands that the ASC Preferred must be held indefinitely unless the sale or other transfer thereof is subsequently registered under the Securities Act or an exemption from such registration is available. Moreover, Lifeline understands that the right to transfer the Preferred Shares will be subject to certain restrictions, which include restrictions against transfer under the Securities Act and applicable state securities laws. In addition to such restrictions, Lifeline has advised the Holders that they may not be able to sell or dispose of the Preferred Shares as there may be no public or other market for them.


2.8 Approvals . No approval, authorization, consent, order or other action of, or filing with, any person, firm or corporation or any court, administrative agency or other governmental authority is required in connection with the execution and delivery of this agreement by Lifeline or its Holders for the consummation of the transactions described herein, other than as set forth on Schedule 2.8.


2.9 No Breach. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not:


(i) violate any provision of the Articles of Organization or the Bylaws or the Operating Agreement of Lifeline;


(ii) violate, conflict with or result in the breach of any of the terms of, result in a material modification of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time, or both constitute) a default under any contract or other agreement to which Lifeline or Holders are a party or by or to which they or any of their assets or properties may be bound or subject;


(iii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, Lifeline or upon the properties or business of Lifeline; or


(iv) violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a material, adverse effect on Holders or the business or operations of Lifeline .


2.10 Actions and Proceedings. Lifeline is not a party to any material pending litigation or, to the knowledge of Lifeline , after reasonable inquiry, any governmental investigation or proceeding not reflected in the Lifeline Financial Statements and, to its best knowledge, no material litigation, claims, assessments or non-governmental proceedings are threatened against Lifeline except as set forth on Schedule 2.10 of this Agreement.


2.11 No General Solicitation . Holders are not purchasing (or exchanging for) the ASC Preferred because of or following any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting, or any solicitation or a subscription by a person other than a representative of ASC .


2.12 Taxes. Lifeline has filed all tax, governmental and/or related forms and reports (or extensions thereof) due or required to be filed and has paid or made adequate provisions in the Lifeline Financial Statements for all taxes or assessments which would


become due as of the Closing Date, and there are no deficiency or audit notices outstanding. No extensions of time for the assessment of deficiencies for any tax period is in effect. No deficiency or audit notice is proposed or, to the knowledge of Lifeline, after reasonable inquiry, threatened against Lifeline .


2.13 Compliance with Laws. Lifeline has complied with all federal, state, county and local laws, ordinances, regulations, inspections, orders, judgments, injunctions, awards or decrees applicable to it or its business which, if not complied with, would materially and adversely affect the business of Lifeline .


2.14 Agreements . Schedule 2.14 sets forth any material contracts or arrangements to which Lifeline is subject, whether written or oral, that are not otherwise reflected in the Lifeline Financial Statements.


2.15 Brokers or Finders. No broker's or finder's fee will be payable by Holders or Lifeline in connection with the transactions contemplated by this Agreement, nor will any such fee be incurred as a result of any actions by Holders .


2.16 OSHA and Environmental Compliance . To the knowledge of Lifeline, Lifeline has duly complied with, and its offices, real property, business, assets, leaseholds and equipment are in compliance in all material respects with, the provisions of the Federal Occupational Safety and Health Act, the Environmental Protection Act, and all other environmental laws. There have been no outstanding citations, notices or orders of non-compliance issued to Lifeline or relating to its business, assets, property, leaseholders or equipment under such laws, rules or regulations.


Lifeline has been issued all required federal, state and local licenses, certificates or permits relating to all applicable environmental laws. There are no visible signs of releases of hazardous substances at, upon, under or within the real property owned by Lifeline . There are no underground storage tanks or polycholorinated biphenyls on that real property. To the best of Lifeline's knowledge, after reasonable inquiry, the real property has never been used as a treatment, storage or disposal facility of hazardous waste. To the best of Lifeline 's knowledge, after reasonable inquiry, no hazardous substances are present on the real property or any premises leased by Lifeline excepting such quantities as are handled in accordance with all applicable manufacturer's instructions and governmental regulations and in the proper storage containers and as are necessary for the operation of the commercial business of Lifeline .


2.17 Tangible Assets . Lifeline has full title and/or leasehold interest in all real estate, machinery, equipment, furniture, leasehold improvements, fixtures, owned or leased by Lifeline, any related capitalized items or other tangible property material to the business of Lifeline (the "Tangible Assets" ). Other than as set forth in Schedule 2.17, Lifeline holds all rights, title and interest in all the Tangible Assets owned by it and included in the Lifeline Financial Statements or acquired by it after the date on the Lifeline Financial Statements free and clear of all liens, pledges, mortgages, security interests, conditional sales contracts or any other encumbrances. All of the Tangible Assets are i n good operating condition and repair and are usable in the ordinary course of business of Lifeline and conform to all applicable laws, ordinances and government orders, rules and regulations relating to their construction and operation, except as set forth on Schedule 2.17. To the best of its knowledge Lifeline has clear title to all of its fictional business names, trading names, registered and unregistered trademarks, service marks and applications (collectively, the " Marks ") and Marks are included as Tangible Assets .


2.18 Liabilities. Lifeline did not have any material direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, known or unknown, fixed or unfixed, liquidated or unliquidated, secured or unsecured, accrued or absolute, contingent or otherwise, including, without limitation, any liability on account of taxes, any governmental charge or lawsuit (all of the foregoing collectively defined to as " Liabilities "), which are not fully, fairly and adequately reflected on the Lifeline Financial Statements , except for any specific Liabilities set forth on Schedule 2.18. As of the date of Closing, Lifeline will not have any Liabilities , other than Liabilities fully and adequately reflec ted on the Financial Statements except for Liabilities incurred in the ordinary course of business which will not exceed $50,000 on the Closing Date or as set forth in Schedule 2.18.


2.19 Operations of the Company. From the date of the Lifeline financial Statements, through the Closing Date, Lifeline , has not and will not, outside of the ordinary course of business, have:

(i) incurred any indebtedness or borrowed money that is or will be charged against Lifeline, other than loans, if any, from ASC ;

(ii) declared or paid any dividend or declared or made any payment or distribution of any kind to any member, or made any direct or indirect redemption, retirement, purchase or other acquisition of any interests in its capital structure;

(iii) made any loan or advance to any member, officer, director, employee, consultant, agent or other representative or made any other loan or advance;

(iv) disposed of any assets of Lifeline ;

(v) materially increased the annual level of compensation of any executive employee of or consultant to Lifeline ;

(vi) increased, terminated, amended or otherwise modified any plan for the benefit of employees of Lifeline ;

(vii) issued any membership interests or rights to acquire such interests; or

(viii) entered into or modified any contract, agreement or transaction.


2.20 Access to Records. The limited liability company financial records, minute books, and other documents and records of Lifeline will be made available to ASC prior to the Closing Date.


2.21 Intangible Assets . To the knowledge of Lifeline , it has full title and interest in all licenses, patents or other intangible property material to the business of Lifeline (the "Intangible Assets "). Other than as set forth in Schedule 2.21, Lifeline holds all right, title and interest in all the Intangible Assets owned by it in the Lifeline Financial Statements or used in its operations free and clear of all Encumbrances.


2.22 Full Disclosure. No representation or warranty by Lifeline in this Agreement or in any document or schedule to be delivered by them pursuant hereto, and no written statement, certificate or instrument furnished or to be furnished by Lifeline pursuant hereto or in connection with the negotiation, execution or performance of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state any fact necessary to make any statement herein or therein not materially misleading or necessary to complete and correct presentation of all material aspects of the business of Lifeline .


SECTION 2B. REPRESENTATIONS AND WARRANTIES OF HOLDERS


Each Holder represents and warrants as to such Holder only, as follows:

2.23 Receipt of Corporate Information; Independent Investigation; Access . To the extent requested, all documents, records and books pertaining to ASC and the Preferred Shares have been delivered to Holders . All of the Holders ' questions and requests for information have been answered to the Holders' satisfaction. Holders acknowledge that they, in making the decision to exchange all of their interests in Lifeline for Preferred Shares , have relied upon independent investigations made by them or their representatives, if any, and they have been given access to and the opportunity to examine all material contracts and documents relating to this Agreement and an opportunity to ask questions of, and to receive information from, ASC B> or any person acting on its behalf concerning the terms and conditions of this Agreement. Each Holders' advisor, if any, has been furnished with access to all available materials relating to the business, finances and operation of ASC and materials relating to the ASC Preferred which have been requested. Holders and their advisors, if any, have received complete and satisfactory answers to any such inquiries.


2.24 Risks . Holders acknowledge and understand that the exchange for the ASC Preferred involves a high degree of risk and is suitable only for persons of adequate financial means who have no need for liquidity in this investment in Preferred Shares that (i) Holders may not be able to liquidate the investment in the event of an emergency; (ii) transferability is extremely limited; and (iii) in the event of a disposition or other adverse events, Holders could sustain a complete loss of their entire investment. The Holders understand and acknowledge that ASC currently has no material assets and no operating business. Holders further understand and acknowledge that ASC has liabilities as listed in Schedule 3.4. Holders a re sufficiently experienced in financial and business matters to be capable of evaluating the merits and risks of an investment in ASC ; have evaluated such merits and risks, including risks particular to this situation; and have determined that this investment is suitable for Holders . Holders have adequate financial resources and can bear a complete loss of the ASC investment.


2.25 Investment Intent . Holders hereby represent that the Preferred Shares are being acquired for the Holders' own accounts with no intention of distributing such securities to others. Holders have no contract, undertaking, agreement or arrangement with any person to sell, transfer or otherwise distribute to any person or to have any person sell, transfer or otherwise distribute the Preferred Shares. Holders are presently not engaged, nor do the Holders plan to engage within the presently foreseeable future, in any discussion with any person regarding such a sale, transfer or other distribution of the Shares or any interest therein.


2.26 Compliance with Federal and State Securities Laws . Holders understand that the Preferred Shares have not been registered under the Securities Act. Holders understand that the Preferred Shares must be held indefinitely unless the sale or other transfer thereof is subsequently registered under the Securities Act or an exemption from such registration is available. Moreover, Holders understand that their right to transfer the Preferred Shares will be subject to certain restrictions, which include restrictions against transfer under the Securities Act and applicable state securities laws. In addition to such restrictions, Holders realize that they may not be able to sell or dispose of the Preferred Shares as there m ay be no public or other market for them. Holders understand that certificates evidencing the Preferred Shares shall bear a legend substantially as follows:


THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE LAW OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS


SECTION 3. REPRESENTATIONS AND WARRANTIES OF ASC


ASC hereby represents and warrants as follows:


3.1 Organization and Good Standing. ASC is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. It has the corporate power to own its own property and to carry on its business as now being conducted and is duly qualified to do business in any jurisdiction where so required except where the failure to so qualify would have no material adverse effect on its business.


3.2 Corporate Authority. ASC has the corporate power to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been, or will be prior to the Closing Date , duly authorized by the Board of Directors of ASC as required by Nevada law. The execution and performance of this Agreement will not constitute a material breach of any agreement, indenture, mortgage, license or other instrument or document to which ASC is a party and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to ASC or its properties. The execution and performance of this Agreement will not violate or conflict with any provision of the Articles of In corporation or by-laws of ASC .


3.3 The Preferred Shares . At the Closing, the Preferred Shares to be issued and delivered to Holders hereunder will, when so issued and delivered, constitute valid and legally issued shares of ASC , fully paid and nonassessable.


3.4 Financial Statement: Books and Records. Attached as Schedule 3.4 are the audited financial statements (balance sheet, income statement and Notes) of ASC for the period from its incorporation through June 30, 2005, (the " ASC Financial Statements "). The ASC Financial Statements fairly represent the financial position of ASC as at such date and the results of their operations for the periods then ended. The ASC Financial Statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis with prior periods except as otherwise stated therein. The books of account and other financial records of ASC are in all respects complete and correct in all material respects and are maintained in accordance with good busin ess and accounting practices.


3.5 No Material Adverse Changes.


Except as described on Schedule 3.5, since June 30, 2005, there has not been:


(i) any material adverse changes in the financial position of ASC except changes arising in the ordinary course of business, which changes will in no event materially and adversely affect the financial position of ASC .


(ii) any damage, destruction or loss materially affecting the assets, prospective business, operations or condition (financial or otherwise) of ASC whether or not covered by insurance;


(iii) any declaration setting aside or payment of any dividend or distribution with respect to any redemption or repurchase of ASC capital stock, other than as agreed upon among the parties;


(iv) any sale of an asset (other than as described in (iii) above, or in the ordinary course of business) or any mortgage pledge by ASC of any properties or assets; or


(v) adoption or modification of any pension, profit sharing, retirement, stock bonus, stock option or similar plan or arrangement.


(vi) except in the ordinary course of business, incurred or assumed any indebtedness or liability, whether or not currently due and payable;


(vii) any loan or advance to any ASC Shareholder, officer, director, employee, consultant, agent or other representative or ...